Seems like every discussion about proposed development in Newton, somebody inveighs against greedy developers. Specifically, somebody inevitably suggests that denying the developer a profit should be a primary reason for supporting or not supporting a proposal. 

I want to suggest that developer profit should not be a primary consideration. I want to propose three questions that we should ask first. 

Q1: Do you want more homes in Newton? 
Q2: If the answer to Q1 is yes, do you want to create new homes only for those who qualify for subsidies?
Q3: If the answer to Q2 is no, how much more market-rate housing do you want, of what type, and where? 

And, I want to recommend a productive way to think about the developer role in our land-use discussions: The more predictable our land-use is, the more the potential value of a property accrues to the current owner of the property, not a speculative developer. So, make fewer redevelopment decisions by special permit.

To kick things off, many (most? nearly all?) of us living in market-rate (not subsidized) housing live in homes that were built by for-profit developers. I’m not a local historian, but as I understand the history of my neighborhood, many of our well-loved homes were built by a single builder hoping to make a buck in the 1920’s. Essentially all of Oak Hill Park was built by a single developer after WWII, whose profits were enabled by the GI bill. Nearly all the homes on Truman Rd.*, off Parker St. south of Route 9, were originally Capes and ranches built in the early 1950’s, presumably by a single developer. I’m sure there are myriad other examples across Newton. The point is that the Newton we enjoy — again, regardless of our positions on the housing debate — is largely a product of developers building and expanding homes across the city.

Which is not to valorize developers, but to note that developers are responsible for the Newton we have and might be useful in creating the Newton we want. But, first, we have have to figure out what our goals are for housing. Then, we can figure out what constraints we want to put place on developers to achieve those goals. 

Let’s take a look at some expressions of anti-developer and pro-developer sentiment, see what they mean, and see if it’s possible to translate that into a more productive discussion on the future of housing in Newton. 

There are three common expressions of anti-developer sentiment. 

Subsidized housing only

Some folks who criticize market-rate housing in Newton say that they would be fine with not-for-profit developers or the city, state, or federal government building housing. Being anti-developer, in this case, is just a different way of saying that they want the the city to add only subsidized housing to our existing stock. No new market-rate homes. 

No teardowns

Other folks want to limit the ability of developers to teardown existing, typically modest homes and replace them with McMansions or McMiniums (c). I think that’s just a different way of saying that one wants to preserve the size and scale of existing homes in the city. (Some believe that this will also help maintain those existing homes as attainable, but that’s complicated and the subject of a future post.) 

By-right only

And, some folks say that they are fine with developers building new homes by-right, but that granting special permits for additional units serves no other purpose than to increase developer profit. Another version of this plays out in multi-home projects where developer greed is an argument for allowing fewer homes than the proponent proposes. This is basically a small-growth policy with developer greed a justification for limiting the scope of projects. We see this on projects ranging from the four-home proposal at 145 Warren St. to the biggest developments, like Northland on Needham St. and the Riverside Station project.

Interestingly, there is some, but not complete overlap among those the three views. We see on the City Council some councilors who want only subsidized new housing, some who want to limit teardown, and some who generally want to reduce the number of homes in any given proposal. There are a few who appear to want as little new market-rate housing as possible, but don’t feel the need to constrain redevelopment that doesn’t add net new homes. These folks appear to be fine with Newton homes getting larger, even if it’s developers building the new, larger homes and making a profit.

Viewed through the anti-developer lens, supporters of new market-rate homes — such as your humble scribe — are often characterized as simply or principally enabling developer greed and profits. It’s important to understand that some of us housing advocates think there is not enough housing choice in Newton across the income spectrum, not just for those qualifying for subsidized housing. And, the problem is just getting worse as our essentially fixed stock of single-family homes gets increasing expensive. Our answer is that developers are the mechanism by which market-rate housing — and much subsidized housing — is built. 

That’s the key. If we are going to have new market-rate housing in Newton, either net new or replacement, it’s going to be developers who build it. And, there is almost certainly no way the city can directly cap profit. But, we can decide if we want new market-rate housing. And, we can decide what kind of housing we want built. So, let’s have that discussion. Before the perhaps not-so-useful arguments about developers.

Let’s start with net new housing. Where do you stand?

Q1: Do you want more homes in Newton? 

Q2: If the answer to Q1 is yes, do you want to create new homes only for those who qualify for subsidies?

If the answer to either Q1 or Q2 is yes, you want to effectively eliminate the opportunity available to for-profit developers to create net new homes. But, not because developers are bad, but because your vision for Newton does not include adding market-rate housing.

Beyond a strict moratorium on new market-rate housing, it gets a little more nuanced, but not by much. The developer still doesn’t matter.

Q3: If the answer to Q2 is no, how much more market-rate housing do you want, of what type, and where? 

Whether it’s on Warren St., in Newtonville, or at Riverside Station, we should determine what kind of housing we want, not what kind of housing will or will not generate a developer profit. If you want, like I do, significantly more market-rate homes with a wider variety of types and sizes, it’s going to be developers who build them. More or fewer new homes. Larger or smaller units. Developers are going to build them. And, the developer profit is one-time event. But, the fruits of the developer’s investment will last for decades.

If you’re still concerned about developer profit, there’s a way to constrain the opportunity to speculate, at least a little: make it super clear what can be built where.

There is no question that a property increases in value the moment it becomes possible to build more or larger housing. Every instance of a rezoned lot or lots, every special permit granted is a wealth-creation event. It’s at least partially a wealth-creation event for the property owner at the time additional rights are granted. If we make that wealth-creation event depend on lot-specific decisions, the property owner who benefits from the wealth-creation event is likely going to be a developer. If we make the wealth-creation a broader zoning decision, the wealth-creation event benefits the folks who own the property at the time of the rezoning. 

To illustrate, let’s take at 145 Warren St. The property is a half-acre lot with a single home, zoned two-family by right, with opportunity for more homes by special permit. At the time the developer bought the home, the value of the opportunity included the certainty of being able to build at least one more home on the property plus the discounted possibility of building more, the discount based on the perceived likelihood that the City Council would grant a special permit for more homes. Any decent real estate agent would counsel the homeowner to factor that opportunity into the asking price. And, developers would bid against each other based on the opportunity. So, much of the opportunity would result in more money for the homeowner. If you doubt that homeowners are getting some of the benefit of their homes being torn down and replaced with McMansions or McMiniums, take a look at how big a premium that small homes on large lots are getting.

Back to 145 Warren St., because it’s the developer taking the risk that the City Council would deny the permit, the developer reaps more of the value of development. If the right to build three, four, or more homes had been available by right, more of the benefit of the redevelopment opportunity would have flowed to the previous homeowner. 

If you want to limit a developer’s profit opportunity and shift it to the homeowner, then, I humbly suggest, decide what kind of development makes sense and make that development possible by right, as part of zoning redesign. To figure out where you stand on housing and zoning redesign, answer the three questions.

* A very interesting street to examine the impact of Newton’s current zoning.